The Climate Change Authority (CCA) has released its final report on the review of the Renewable Energy Target. It has recommended leaving the overall RET and framework unchanged but has recommended a number of changes that will dampen future support for solar technologies.
The CCA has moved away from its previous suggestion to discount the number of certificates from solar and instead has recommended that a lower cap for commercial systems be introduced and deeming phased out. Both of these requirements are aimed at capping the number of small-scale technology certificates (STCs) that can be created, to reduce the cost impact on electricity consumers.
The CCA has recommended that solar PV systems in excess of 10kW will no longer be eligible for STCs and instead will be eligible to produce large-scale generation certificates (LGCs) on the basis of five years deeming at a time. Currently these systems are eligible to produce 15 years’ worth of STCs. This will reduce the attractiveness of solar PV in commercial applications. Only 2000 PV systems installed in 2012 that claimed certificates had a capacity of more than 10kW. This amounts to less than 1 per cent of all systems installed and amounts to around 2.5 per cent of total certificates created.
The other key change that the CCA has recommended is to phase out deeming for solar PV and solar hot water.
Under a reduced deeming approach, small-scale systems would only be provided with certificates for generation up to 2030. A solar PV unit currently receives 15 years’ worth of certificates upfront. Reduced deeming would mean that a solar PV unit installed in 2019 would only receive 12 years’ worth of certificates – rewarding generation up to and including 2030, but not beyond.
This change would only have an impact from 2017 onwards for PV where a system installed in 2017 would receive 14 years deeming rather than the current 15 years. In the case of solar hot water, the change would only impact from 2021 where a solar water heater system installed in 2021 would get 10 per cent less STCs representing nine years’ deeming, rather than the current 10 years.
As the number of years deeming reduces, it becomes less attractive to create certificates. We may find that by 2023 to 2025, when the years deeming reaches five to eight years, the renewables scheme may no longer provide any effective support for solar.
We expect that the government will respond to the CCA’s recommendations in the new year. It would appear that the changes outlined above could be substantially implemented through changes to the regulations governing the scheme and would not require legislative changes.
Ric Brazzale is managing director of Green Energy Trading